7 Tax-Saving Tips Every Entrepreneur In Syracuse NY Should Know
When you are a businessman or an entrepreneur, you value every dollar that you spend, which includes paying taxes. Saving money while paying the right amount of tax may sound far-fetched, but not entirely impossible.
Here are seven tips for tax-saving that entrepreneurs in Syracuse, NY should know:
- Track your expenditures
Tracking your expenditures will let you know where exactly your money goes. With the advent of technology, you can use apps or various software to assist you in keeping a record of the money you spend. You can also search for websites that offer financial assistance, such as empowerfcu.com, to gain further knowledge on the best methods of properly tracking your expenditures.
Most financial institutions such as banks have online banking systems that can provide you access to your transactions. From there, you can get a glimpse of your spending habits, spending patterns, what you buy most or what you buy least, and a whole lot more. Popular software such as Quicken or Quickbooks will provide you a chance to keep track of your deductible expenses.
- Record your carryover tax deductions
This term might seem unfamiliar to you, but carryover tax deductions are actually about your net operating losses, capital losses, charitable donations, and others, that were not fully utilized in one fiscal year, which can be carried over to the next fiscal year.
You may not even remember the taxes you’ve spent a few days ago, or worse, the previous years. These pertinent information may be forgotten unintentionally, especially when you change your tax preparers. Keep a file to track all deductions so that you’ll have a copy prepared for the following year.
Failure to keep a record of your carryover tax deductions may even lead to tax lawsuits if you are unable to pay the right taxes.
- Set up a home office
Aside from saving on rent and transportation costs among other things, setting up a home office will qualify you for the Home Office Deduction. Although home office deductions have a reputation of being red flags in tax audits, this can be used to your advantage by making sure that you have clean records and that you actually qualify for the deduction.
An example of the Home Office Deduction, when using a simplified option, is if you have a deduction of 5USD per square foot, with up to 300 ft, it would total 1,500USD.
- Watch your Mileage and Auto Expenses
Mileage and auto expenses can be used for deduction, especially if these are for business trips and business matters. This may also seem unfamiliar to others, but it’s possible to take advantage of this deduction.
The Internal Revenue Service or IRS uses two steps to compute this deduction. The first is making sure you track your actual expenses. After that, deduct the percentage that was used for your business. The second step is tracking the vehicle’s actual mileage, then take a tax deduction for those miles. Bear in mind that the rate given for 2018 is 54.5 per mile.
- Get tax software
Getting a tax planning software is considered a must for entrepreneurs. Tax software such as Turbo Tax or other similar software will help ease the preparation and filing of your taxes online. Not only does it save money, but it also saves you time.
Go paperless. Reports from the IRS show that less than 1% of online tax returns have errors. However, the mistakes skyrocket to 21% when you file your taxes using paper returns. If you think this is a heavy workload for you to bear, then consider getting a tax preparer or a bookkeeper or a Certified Public Accountant if you can afford one.
- Give help to charities
One can apply for a tax deduction for charitable donations by filing it on Schedule A of Form 1040. The schedule isn’t just exclusive for claiming charitable giving. It covers and computes all itemized deductibles you’re qualified for claiming so that you can transfer the total to your tax return instead of the usual standard deduction.
Giving or sharing to a charity can also be done not only through cash but also in the form of items. These items can be any of the following: preloved items, furniture, good electronics, and more.
- Give to an IRA
This is one of the easiest ways to cut off your taxes: simply pump money into a traditional IRA or Individual Retirement Account or 401 (k), which is an employer pension plan.
The money you contribute to either account comes in tax-free, and your associated savings are a function of your effective tax rate. This means that if you contribute 5,000USD to either account, and your effective tax rate is 30%, you’ll save 1,500USD in taxes.
Being an entrepreneur is never that easy, and tax filing can be a bit stressful. Hopefully, the tips above will help you gain more tax savings. Time flies so fast and you may not realize that another tax season is approaching. It’s best to be prepared at all times.